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Federal Budget 2009: The Yes Minister preview.

May 11th, 2009 · Greg Atkinson · 6 Comments

Lights, camera, action! It is almost time for another budget from the masters of spin and we are all invited to watch the drama unfold. The 2009 federal budget will be one of the most eagerly awaited budgets in years and the key question for me is: why is the Government talking up the need to borrow and spend one moment and then in the next breath, warning us that we all need to share the pain because the Government has to reign in spending?

To get an answer to this question you first need to understand that politicians (of all flavours) have their own form of logical thought: politicians logic. Once you understand this you can start to map out how the Government will deflect any criticism directed towards them and justify big spending, big debt and yet still throw money at certain areas in order to shore up their poll numbers, while at the same time talk about the need for spending cuts. Confused? You ought to be.

If you are not familiar with the concept of politicians logic then I suggest you watch this clip from the very witty BBCTV series Yes Minister.

After watching this clip you can easily see how politicians logic applies to Rudd and Co. Take for example this often rolled out defence of the Government’s economic management: Australia was faced with the fallout from the global financial crisis and thus the government had at act. The alternative was to do nothing and this was not acceptable.

Rudd stressed this point when launching his $42 billion dollar economic stimulus package and said that in terms of dealing with the global economic crisis the choice was between the government doing nothing and letting the free market “let rip”. (you can find the clip where he actually made this point is this article: Kevin Rudd and Criswell: can you spot the difference?) Politicians logic at its finest.

But the Governments simplistic (politicians) logic is quite flawed because Kevin Rudd has said on a number of occasions that the recession in Australia was caused by factors external to Australia. Therefore it logically follows that the solution to Australia’s recession will also be driven by external factors (such as a turnaround in the U.S. and Japanese economies) and therefore perhaps the best course of action in Australia was to simply do as little as possible.

It seems almost surreal now that the Government is talking about Australian’s having to share the budget pain just months after boasting about how much taxpayers money they are going to spend. It becomes even more bizarre when you take into account the billions of dollars that will be used to roll-out the national broadband network when this could have all been left to the private sector. (and thus reduce the burden on the budget)

Already the Government’s pre-budget softening up of the Australian public has started. Wayne Swan has apparently said the budget will be a “very Labor” one…mmm…just like the ones handed down by the NSW Labor Government perhaps? Wow that is so reassuring. He has also taken aim at the former Howard Government for over-spending during the boom years which is a bit rich when they left him a pile of money in the form of a budget surplus.

In any case it is irrelevant now what Howard and Costello did years ago, it is time for Rudd and Swan to finally accept that they are responsible for the managing the economy. The Rudd Government, for better or for worse, is now running the show and they need to stop blaming the former government, Thatcher, Reagan, Neo-liberals, extreme capitalists and evil bankers. But don’t hold you breath waiting for this to happen as I reckon the blame game will be in full swing over the next few weeks.

On the other side of politics Malcolm Turnbull must be wondering what he has to do to lift the fortunes of the Opposition and his own support amongst voters. So far he just does not seem to be connecting with the Australia public and his response to budget will probably be his last chance present himself as a viable alternative to Kevin Rudd. If he fails to dent the Government’s support then I guess he will not be the Opposition Leader in 2010.

The one bright spot in all this is that with the focus on spending cuts, we should avoid another Australia 2020 Summit!

6 responses so far ↓

  • 1 Senator13 // May 14, 2009 at 5:26 pm

    This was a soft budget. There were no hard decisions in it, just more foolish throwing money around. Where were these tough decisions that Rudd and Co were rambling on about? Where is the plan to get out of debt?? This is just more spending. There is nothing hard about that.

  • 2 Greg Atkinson // May 14, 2009 at 8:30 pm

    Senator13, actually the budget was scarier than I thought. I was expecting spending cuts but instead the Government seems intent on trying to spend Australia out of a global recession. The big problem is that Government debt is most likely going to blow out by billions more than estimated in the budget and so the nation is going to sink further into debt over the next few years. maybe we should start taking bets for when the debt will be paid off….I reckon 2020 is looking good.

  • 3 Ned S // May 15, 2009 at 9:55 am

    Senator 13 – Keep an eye on what Ken Henry’s latest tax system review (due in December I think ?) has to say.

    The recession could/should be turning nasty about then. And if the review reckons taxing the heck out of capital gains and locking all super away until the age of 67 (with super being meant for retirement and 67 being the new retirement age), Mr Rudd just might have some interesting decisions to make.

    But my guess is he won’t make them – Not then anyway – Get the election out of the way and do it after that if necessary.

    Depends though; If he has been successful in convincing everyone how bad things really are and looking sad, and that while he personally certainly doesn’t want to do such really horrible things, the big bad evil world has conspired against good, kind, nice and fiscally prudent little Oz to make such horrors necessary, he just could have a crack.

    They’ll be “sampling the waters” so to speak in such regards a lot before taking any tough decisions. And weighing whether it might make them unacceptably unpopular compared to what the opposition is offering. And the opposition don’t seem to have anything much to offer – So there probably won’t be much stress from that quarter.

    But be very certain – If you have any money, they want it. And if they figure there is advantage to them in keeping you working until you are 80, they will be trying to figure out how to do it … My best guess for now anyway?

    Cheers and Smile!

  • 4 Senator13 // May 15, 2009 at 9:56 pm

    What Ken puts forward in his review and what Rudd implements will most likely be two very different things.

    I really hope that there are a few fundamental changes to the tax system. I also hope that the changes that eventually get implemented are not ideologically driven and are actually put in place to improve the system for both individuals and business. The opportunity is there to improve on the system.

  • 5 Ned S // May 16, 2009 at 12:55 am

    I’m very open to reform of the tax system. The current system is a nightmare in its complexity.

    Made so by some quite necessary changes over time of course. But also by a lot of government twiddling over the years for various far more questionable reasons.

    But I surely think they are going to be chasing some loot soon – The funding for the stimulus has to come from somewhere. And ultimately it’ll be the same story – The truly poor can’t pay; It’s cost effective for the truly wealthy to hire well informed and competent professionals to ensure their payments are minimised; So there isn’t much question about who will pay.

    That’s fine – I don’t hate the wealthy. Or feel inclined to victimise the poor. But a far simpler system would assist us all regardless.

    I guess the argument for complexity is that the real world is complex so the tax law needs to reflect that.

    And I suspect that simplicity isn’t easily achieved. It would probably require a rebuild from the ground up. Rather than more twiddling around the edges which just tends to just add more complexity. And a lot of people make a lot of money from things being complex I guess.

    But I’m a pretty simple minded man – I occasionally let simple minded solutions run through my mind – Like just having a flat rate of GST on everything – We need more tax, we raise the rate. We need less tax, we drop the rate. Hmmm … A system that said the more you consume the more tax you pay – End of story – No taxes on producing – Just one simple tax on consuming. Businesses, individuals, companies, trusts, charities, churches – We don’t care what sort of entity you are – We treat you all the same. Now that would be capitalism in action – Lean, mean competitive producers who aren’t taxed, competing for reluctant consumers who are.

    The pensioners would need some more money to compensate. And we might have to think about some things like multinationals that were producing here and exporting for consumption – No problems, the minute it goes offshore it’s been consumed – Pay the tax. As for vice versa – Same deal – The minute it hits the shore it’s been consumed – Pay the tax. As in I’d tax at every discernible level through the supply chain. For both goods and services.

    But it would run contrary to the whole consumerism type model our economy is based on. (Greg – You’ll tell me why I’ve lost the plot here I hope??? Smile! ???)

    Another thought: I can’t see them being too keen to change things too much if it involves throwing out 100 years of case law or whatever plus (presumably?) pretending the English legal precedents those judgements were based on never happened? Who’s to know – It could even be unconstitutional or somesuch???

    And ultimately this stuff does need to be defensible in the courts.

    Just another rant – Don’t mind me.

  • 6 Greg Atkinson // May 21, 2009 at 4:13 pm

    I am all for a simpler tax system. I think you know you have problems with a tax system when you need an small army of people both in the private and public sector just to handle tax returns!

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